Texas Attorney General calls fantasy sports betting illegal gambling

Daily fantasy sports sites have taken another blow after Texas Attorney General Ken Paxton branded them gambling operations.

Following a lengthy review during which lobbyists convinced Texas residents to bombard him with messages asking for sites like DraftKings and FanDuel to be allowed to continue, Paxton delivered a damning verdict reinforcing the belief that gambling on the performance of a participant with the house taking a cut is prohibited.

FanDuel and DraftKings claim to be games of skill and therefore exempt from the 2006 Unlawful Internet Gambling Enforcement Act, which only bans games of chance and not games of skill in the 46 states where sports wagering is illegal.

It is currently unclear whether Paxton will seek to banish sites like FanDuel and DraftKings from Texas, as New York Attorney General Eric Schneiderman attempted to do, but it is another hammer blow for the sites.

Paxton distinguished daily fantasy games from season-long games enjoyed between friends, saying the latter should be legally allowed to continue.

DraftKings to Fight Back
DraftKings promised to fight back against Paxton. Company attorney Richard Mastro said the firm intends to operate openly and transparently in Texas, so that the millions of Texans who are fantasy sports fans can continue to enjoy the contests they enjoy.

The Fantasy Sports Trade Association, which lobbied Paxton in a bid to preserve the sites’ right to operate in Texas, is currently hosting a conference in Dallas, and it said it disagrees with the opinion of Paxton and said it will fight to ensure that the 4 million people in Texas that play daily fantasy sports games will be allowed to continue to do so.

New York AG vs. DraftKings and FanDuel
In New York, after Schneiderman issued them with a cease and desist order, they appealed to the New York Supreme Court, where Justice Manuel Mendez granted Schneiderman’s request for an injunction on the sites, forcing them to shut down. DraftKings and FanDuel then filed for stay orders with an appellate court to continue operating in the state, which were granted as a temporary stay of execution so to speak.

This month a five-judge panel is set to review the operators’ appeal and decide whether to let them continue in the state or let Mendez’s ruling stand. Since 2011, 74 of Mendez’s rulings have been appealed and only a quarter have been successful, so the operators could soon lose a tenth of their market. They will look to expand overseas, but those plans have been delayed while the legal wrangling in the US rumbles on.

Schneiderman is a well-known advocate of consumer protection and his decision to outlaw the games reverberated around the country. Illinois attorney general Lisa Madigan has also decided the sites constitute illegal gambling and has asked them to stop taking bets from Illinois residents. After some wrangling, she has allowed them to continue operating in the state until their appeal against her ban is heard in court in 2016.

Other states such as Pennsylvania are instead looking to regulate daily fantasy, allowing them to operate but taking their cut in tax revenues.

Meanwhile, advocates of legal sports betting in the United States are enjoying the discussions generated by daily fantasy sports gambling, because it is impossible to say that wagering on the performance of athletes in a fantasy sports contest is any different than betting on a team straight-up, which gives much better odds to the average Joe.